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Edward Morgan A/K/A Eddy Morgan v. World Alliance Financial Corp

January 31, 2013


The opinion of the court was delivered by: Padova, J.


This case arises out of a 2009 reverse mortgage transaction, pursuant to which Plaintiff Edward Morgan transferred his ownership interest in his marital home to his wife, who then entered into a reverse mortgage on the house in her name alone. After Plaintiff's wife died, the loan became due and payable in full, Plaintiff was unable to pay, and he is now facing foreclosure. In this action, Plaintiff asserts two claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"): a damages claim against World Alliance Financial Corp. ("World Alliance") and Flagship Mortgage Corp. ("Flagship"), and a rescission claim against World Alliance and Reverse Mortgage Solutions, Inc. ("RMS"). World Alliance and Reverse Mortgage Solutions, Inc. have filed a Motion to Dismiss the claims against them. For the following reasons, we grant that Motion insofar as it seeks dismissal of the rescission claim, but deny it insofar as it seeks dismissal of the damages claim.


The Complaint alleges that Plaintiff Edward Morgan is the surviving spouse of Yvonne O. Morgan ("Mrs. Morgan"). (Compl. ¶ 14.) From 1997 until Mrs. Morgan's death, Plaintiff and Mrs. Morgan lived together in a house at 5240 Catharine Street in Philadelphia (the "Property"). (Id. ¶ 6, 16.) The Property had been in Mrs. Morgan's family since 1969, when her parents purchased it. (Id. ¶ 15.) In 1997, after Mrs. Morgan's mother passed away, Mrs. Morgan, acting as administrator of her mother's estate, deeded the property to herself and Plaintiff. (Id. ¶ 17.) Later that same year, Mrs. Morgan executed a second, "corrective" deed naming herself and Plaintiff as grantees as tenants by the entireties. (Id.)

In 2008 or 2009, Mrs. Morgan was suffering from cancer, emphysema and coronary artery disease when she began speaking with agents of Flagship, including an individual named Kirk Ayzenberg, about obtaining a reverse mortgage on the Property. (Id. ¶ 22-24.) Flagship and World Alliance subsequently prepared and processed a reverse loan application in the names of Plaintiff and Mrs. Morgan. (Id. ¶ 24.) On or about January 20, 2009, Mrs. Morgan and Plaintiff participated in a Home Equity Conversion Mortgage counseling session, which was arranged by Flagship and World Alliance (id. ¶¶ 27-28), and which a federal statute requires as a condition to the Department of Housing and Urban Development insuring a reverse mortgage. (Id. ¶ 13 (citing 12 U.S.C. § 1715x-20(e) and (f)).) In the counseling session, which was conducted by a representative of ByDesign Financial Solutions ("ByDesign"), Plaintiff was treated as if he was a borrower along with his wife, and ByDesign never suggested that Plaintiff would be removed from the Property's title or that Flagship and World Alliance would structure the transaction so that he would not be a borrower. (Id. ¶¶ 28-30)

Thereafter, Flagship and World Alliance prepared a reverse mortgage application in Mrs. Morgan's name alone. (Id. ¶ 32.) They also prepared documents to take Plaintiff's name off the title to the property. (Id. ¶ 33.) On February 9, 2009, Flagship and World Alliance presented a variety of papers to Mrs. Morgan and Plaintiff for their signatures. (Id. ¶¶ 25, 42.) Among those papers were numerous papers in which both Plaintiff and Mrs. Morgan were identified as borrowers or, in the alternative, in which the two were identified as borrower and co-borrower.

(Id. ¶ 25.) However, also among the papers was a non-standard paper, which Plaintiff signed on February 9, 2009, and which stated: "I Eddy Morgan would like to be removed from the reverse mortgage loan. I would like the property address of 5240 Catherine Street to be just in my wife's name, Yvonne Morgan. Thank you." (Id. ¶ 43.) Mrs. Morgan also signed a non-standard paper, which stated: "I am writing this letter to inform that I, Yvonne Morgan would like to take my husband Eddy Morgan off the reverse mortgage program. I would like the reverse mortgage only in my name." (Id. ¶ 44.) Neither Flagship nor World Alliance explained that the consequence of removing Plaintiff's name from the title to the property and making the loan to Mrs. Morgan alone was that the reverse mortgage would become due and payable in full in the event of Mrs. Morgan's death. (Id. ¶¶ 34, 45). Moreover, neither Flagship nor World Alliance provided to Plaintiff or Mrs. Morgan a "Non-Borrower Spouse Ownership Interest Certification Form," which is a standard form that is designed to explain to a borrower and non-borrower the consequences of making a reverse mortgage to just one member of a husband-wife team. (Id. ¶¶ 35-38.)

The loan closing was held on February 13, 2009, at the Morgans' dining room table. (Id. 50.) At the time of the closing, Mrs. Morgan was 72 years old and Plaintiff was 67 years old. (Id. ¶ 51.) Present at the closing were Mr. Ayzenberg and another unidentified woman (the "Settlement Agent"), who was an employee of a settlement agency that either Flagship or World Alliance had selected. (Id. ¶ 52.) At the closing, the Morgans were asked to sign one paper in which they were both identified as borrowers and another paper in which they were identified as borrower and co-borrower. (Id. ¶¶ 56-57.) Plaintiff was also asked to sign another paper, and when he asked what the paper was for, Mr. Ayzenberg stated that it was so that Mrs. Morgan could get more money from the reverse mortgage loan. (Id. ¶ 58-60.) Neither he nor the Settlement Agent advised Plaintiff that the paper was, in fact, a deed and that, by signing it, Plaintiff was transferring his ownership interest in the Property to Mrs. Morgan. (See id. ¶¶ 61-64.) Plaintiff would not have signed the paper if he had known that it was a deed conveying away his interest in the Property. (Id. ¶ 66.)

Mrs. Morgan executed at the closing an "adjustable rate open-end home equity conversion mortgage" in favor of World Alliance, in a maximum amount of $225,000. (Id. ¶ 68.) Plaintiff was not asked to, and did not, execute the mortgage. (Id. ¶ 69.) He was also provided no written disclosure that informed him of his right to rescind or cancel the transaction. (Id. ¶ 75.) The total loan proceeds from the reverse mortgage were $105,900. (Id. ¶ 70.) The proceeds were used to pay off prior liens of $85,021.44, and to pay closing costs of $9,087.20. (Id. ¶¶ 71, 73.) $5,187.93 was set aside for servicing fees to the loan servicer, and Mrs. Morgan received a check for $6,603.43. (Id. ¶¶ 71, 74.)

According to the Complaint, a reverse mortgage in Mrs. Morgan's name alone, which became due and payable upon Mrs. Morgan's death, was entirely unsuitable for Plaintiff and Mrs. Morgan, because (1) Mrs. Morgan's cancer and other medical conditions reduced her life expectancy; (2) Plaintiff and Mrs. Morgan wanted Plaintiff to retain the home after Mrs. Morgan's death; (3) it was unlikely that Plaintiff would be able to qualify for a mortgage to pay off the loan amount if Mrs. Morgan died; and (4) it was unlikely that Plaintiff would be able to keep the home upon Mrs. Morgan's death. (Id. ¶ 47.)

On July 14, 2009, five months after the reverse mortgage closing, Mrs. Morgan executed a deed for the property, conveying it back to herself and Plaintiff, as husband and wife. (Id. ¶ 82.)

In April or May 2010, World Alliance assigned the reverse mortgage to RMS. (Id. ¶ 83.) RMS is therefore the current mortgage holder. (Id. ¶¶ 83-84.)

Mrs. Morgan died intestate on September 30, 2010, at the age of 73. (Id. ¶ 85.) Because the Property was held by Mrs. Morgan and Plaintiff as tenants by the entireties, Mr. Morgan became the sole owner of the property upon her death. (Id. ¶ 86.) On November 30, 2010, RMS sent a notice (the "Notice"), addressed to Joyce Ann Morgan, which stated that there would be no further advances on the mortgage account and that the mortgage balance had to be repaid in full. (Id. ¶ 87.) The Notice stated that the balance due on the mortgage was $107,482.15. (Id. ¶ 87.)

In August 2011, Plaintiff sent a notice to both World Alliance and RMS, by certified mail, stating that he was canceling the mortgage transaction. (Id. ¶ 107.) In a letter dated September 8, 2011, RMS responded that it was denying Plaintiff's request to cancel the loan. (Id. ¶¶ 113-14.) In a letter dated September 19, 2011, World Alliance likewise stated that it refused to accept Plaintiff's notice of cancellation. (Id. ¶¶ 117-18.) On October 11, 2011, RMS commenced a ...

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